European Union trade sanctions over tax avoidance a 'serious threat'

The headquarters of Mossack Fonseca, where the Panama Papers were leaked from (Reuters)

The might of the European Union could come crashing down on New Zealand if it's found we are in fact a tax haven, and Labour leader Andrew Little says the threat is serious.

The EU says it's losing billions of dollars in lost tax and is considering trade and travel restrictions on countries accommodating such behaviour.

"This is just the sort of thing we were concerned about when this issue first came up with the Panama Papers," Mr Little says.

"It is about New Zealand's reputation, and we don't want to be part of a club that says we'll help others avoid their tax responsibilities."

EU authorities are currently investigating countries it believes are accommodating tax avoiders, with plans to introduce trade sanctions where necessary.

But ACT leader David Seymour says the EU is out of line.

"It's the case of the EU bullying New Zealand when they've got far more problems of their own," he says. "By any objective international standard New Zealand is not a tax haven."

PwC tax and business expert Geoff Nightingale says if the Shewan recommendations are taken on board, the EU will not put New Zealand on a blacklist.

"That will give the EU access to the beneficial ownership of assets, to where distributions are going, to who the trustees are. It'll give them access to all the information they need to administer their own tax law."